How do taxes change after marriage?
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If you’re recently married—first and foremost, congratulations! As you settle into married life together, tax planning may be low on your list of priorities. And perhaps rightly so. But marriage will almost certainly lead to changes in your tax situation, and preparing early can be important if you want to avoid surprises later.
First, let's set some expectations. “There’s no magical new allure that gives you a lot of new benefits,” says Danielle Moncure, a CPA based in Detroit, Michigan. “But there is some planning that you need to prepare for.”
In fact, the preparation may even start before the marriage. “I got married in October, but knowing that was the plan, I changed my withholdings at work earlier in the year,” says Moncure.
That’s because, from a tax standpoint, if you were married on or before Dec. 31, it’s as if you were married for the entire year. The same goes for having a child and some other major life events.
Here are a few of the significant tax-related changes you could experience as a newlywed. Some don’t necessarily require your immediate attention, although you might want to keep them in the back of your mind as you start your new life together.
Your filing status will likely change
Once you’re married, you’ll have to choose between the “married filing jointly” and “married filing separately” tax statuses on your next tax return.
“Generally speaking, ‘married filing separately’ isn’t the best option for most people,” says Moncure. You won’t be eligible for some tax credits or deductions if you choose to file separately, and filing jointly can be easier in terms of the paperwork.
Moncure says there may be exceptions, such as when one spouse earns much more than the other, or one spouse doesn’t want to potentially involve the other if they’ve had some tax complications in the past.
If you’re unsure which status to choose when filing your next return, it may be a good idea to work with an accountant, who can take all your (and your spouse’s) information and do a side-by-side comparison to determine which status is best.
You may have a higher standard deduction
Married couples who file a joint return will have a $25,900 standard deduction for their 2022 tax return, and a $27,700 standard deduction for their 2023 tax return.
The higher standard deduction may mean you won’t itemize your deductions, so things like medical expenses or charitable contributions won’t help your tax situation. But overall, it could lead to paying less in taxes.
You could be eligible for more tax-free gains if you sell a home
When you’re single, you may be able to exclude up to $250,000 in income from the sale of your home. That tax-free limit can double to $500,000 once you’re married.
To receive the higher exclusion as a married couple, both you and your spouse must have lived in the home and used it as your main residence for at least two out of the previous five years. There are some other qualification requirements as well, such as needing to own the home for at least two years before the sale.
Tax-related action items
Knowing that your tax situation will likely change once married, there are a few things you can do to help you and your spouse prepare for next year’s return.
Update your withholdings
If you or your spouse are both employed by companies, you’ll want to figure out if you should update your withholdings right away. This is the amount of money your employer will take out of your paycheck for taxes.
Since your marriage status and combined incomes could change how much you’ll owe, you may find that your employer should withhold more money (so you don’t wind up with a big tax bill later) or withhold less (and you’ll receive more money each paycheck).
Register your new name
If you or your spouse change names, you’ll want to inform the Social Security Administration. Otherwise, your tax return might be rejected because your new name won’t match what’s in the IRS’ database. Also, make sure to register your new name with the U.S. Postal Service, employers, and any financial institutions where you have an account.
If you or your spouse move, you’ll also want to update your address with the USPS, which may pass your new address on to the IRS. You can also file Form 8822 to directly inform the IRS of an address change, or you may be able to notify them by phone or in person.
Look beyond taxes
A new tax situation is one of many financial changes that you’ll probably face as you start married life, and you may also want to set aside some time to go over the rest of your finances while you’re at it. For example, you may be able to save money if you’re both on the same health insurance plan rather than paying for individual plans separately.
Newlyweds also often decide to change how they manage their money once they're married. Couples may put their income and savings into joint accounts, keep their finances completely separate, or open new bank accounts for household expenses and other long term financial goals. There’s no “correct” method or one-size fits all approach as long as you and your spouse do what makes the most sense to you as a couple, financially and otherwise.
Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.
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